“Lighting channels are like tubes of money … Money moves around in the tube, but the total amount of funds remains constant. So, unlike other payment systems, Lightning requires ‘inbound capacity’ in order to receive funds.”
Lightning Labs has released a new feature aimed at improving the usability of the lightning network, a bitcoin payment channel technology aimed at scaling the cryptocurrency.
Called “Lightning Loop,” users will now be able to receive bitcoin in increasing quantities without having to close and reopen new payment channels.
Opening a payment channel requires users to pay the same fees and wait the same amount of time as sending a regular bitcoin transaction the blockchain. However, once the payment channel is opened, a user is able to send bitcoin payments almost instantaneously and at a fraction of the cost.
Normally, these payment channels are set up by users with a fixed capacity.
As Lighting Labs developers Alex Bosworth and Bryan Wu described in a blog post:
As we’ve seen with partnerships with BAKKT and Microsoft, to bring Bitcoin payments to Starbucks, we are edging closer and closer to seeing actual real world payments with Bitcoin. Real world fluid payments, converting fiat to cryptocurrency and back, real time, quickly and with a very small cost of settlement. All of these projects will make Bitcoin and cryptocurrency in general, as an available payment for vehicle for products and services very soon. Real world use case application shows a real maturity and acceptance of the technology, by government, business and the public at large.
With Lightning Loop, this inbound capacity can be withdrawn so that users can keep using the same payment channel to receive bitcoin.
In essence, the Lightning Loop moves funds out of a payment channel and “into a bitcoin wallet, cold storage, or fiat currency via an exchange,” Bosworth and Wu explained in their post. “This emptying of the channel allows [a lighting user] to receive more payments.”
Calling it the “Loop Out” feature, Bosworth and Wu also highlighted that they were currently working on an opposite “Loop In” feature to enable payment channel refills with “on-chain bitcoin from wallets or exchanges.”
“We believe Loop will contribute to the efficiency, scalability, and usability of Lightning. We encourage any Lightning developers, testers, and enthusiasts to begin trying Loop today,” they added.
Very exciting times indeed.